How well do you know your customers? In today’s financial climate, it’s a multi-million-dollar question, and it all starts with your KYC (Know Your Customer) process.
A comprehensive KYC process can help shield your bank from a host of financial crimes — including fraud, identity theft and money laundering. An efficient process also reduces delays in the customer journey. But managing that process is a sizeable challenge if you’re doing it all manually.
KYC automation can transform your entire process — benefiting your customers and employees alike. And with increasingly fierce competition to win and retain both modernization is crucial.
Along with being repetitive and labour-intensive, you’ll know that KYC processes are prone to errors — the kind that can lead to financial losses and reputational damage.
In a fast-shifting regulatory landscape, it can also be hard to keep pace with (and consistently enforce) the latest KYC laws, which puts you at risk of sanctions and fines.
And then there’s the impact on customer satisfaction. Manual KYC procedures slow down how quickly banks can onboard customers — a process that can take anywhere from 2-34 weeks according to Forrester research.
These challenges will likely sound familiar to you. So let’s dive into some of the benefits of KYC automation.
1. Reduce operational costs
According to estimates by Celent, banks will spend $37.1bn globally on operating costs to ensure KYC compliance. A large chunk of which are incurred from “periodic and event-driven reviews”, which involve teams sifting through documents and manually inputting data into systems.
Automated KYC turns a task that takes hours into one that takes seconds, relieving you from the burden of a lengthy and costly process.
2. Increase efficiency
If your compliance teams have to collect, enter and verify data every time you onboard a new customer, you’ll know how enormously time-consuming that can be. KYC automation gives you that time back by taking care of the entire process. 24/7.
But more than that, it can verify your customers immediately rather than forcing them to communicate back-and-forward with you for days and even weeks. This efficiency gain can prove invaluable when it comes to keeping your customers engaged and your onboarding abandonment rates down.
3. Reduced errors
When the KYC process is manually managed, mistakes are inevitable. Not only does that slow everything down, it can lead to fraudulent acts that harm your bottom line — not to mention your brand reputation. KYC automation can systematically hunt for errors and rapidly fix them before they cause problems.
4. Increased security
As customers increasingly favor digital vs in-branch interactions, it’s become far harder to carry out due diligence — exposing banks to heightened risk. With automation built into your KYC processes, you can ensure robust security measures are consistently applied.
Combined with AI, automation can also help you more accurately check the authenticity of any documents supplied by your customers, further reducing security risks.
5. Improved employee and customer experience
For your employees, the KYC process can be a dull and repetitive task that negatively impacts their job satisfaction. For your customers, it can be a slow and frustrating experience that persuades them to take their business elsewhere.
KYC automation helps you simultaneously tackle both challenges — creating a more enjoyable work environment for your people, and a more streamlined onboarding experience for your customers.
Workflow Orchestration
Automating the workflow of the KYC process helps to reduce bottlenecks by ensuring that requests and tasks are routed to the appropriate teams. A workflow map also helps stakeholders to monitor the progress of tasks and provides a consistent, unbiased approach to every customer. Additionally, automated notifications and escalations within the workflow can help to keep people aware of any outstanding tasks and push the process along.
Automated Data Collection
There are numerous data sources that need to be accessed to perform KYC checks, including government databases, credit bureaus and public records. Automating this step in the process to securely pull relevant data from external and internal sources saves time and improves data accuracy. It also ensures that the information gathered is always up to date, so you know you are getting an accurate current profile of your customer.
Risk Screening & Customer Due Diligence (CDD)
Screening and sanction checks can be automated by integrating your system with global watchlists, sanction lists, and politically exposed persons (PEP) databases to identify any potentially high-risk customers.
This in turn helps with CDD. Automated systems can analyze customer data against pre-defined risk files to determine the level of due diligence required for each applicant. Low-risk customers can be routed into workflows where they undergo less intense scrutiny, while high-risk customers will be directed into a workflow that requires further checks.
Intelligent Risk Scoring
You can reduce bias and ensure decision-making efficiency by integrating with intelligent risk scoring models and decision engines. These systems analyze customer data, transaction patterns and risk indicators to generate risk scores to help analyze if a candidate will be an appropriate customer.
Data monitoring & reporting
Automated processes can be used to monitor KYC data and customer activities, triggering alerts for any suspicious transactions. This data can be reported on and fed back into the system for Machine Learning tools to identify any future patterns or anomalies to aid risk assessment.
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